Administration’s Climate Action Plan Breathes New Life Into Oil and Natural Gas Air Regulations

On March 28, 2014, the White House released its Climate Action Plan Strategy to Reduce Methane Emissions. The oil and natural gas sectors are clearly in the cross-hairs for reductions. The report indicates the oil and natural gas sector was responsible for 28 percent of man-made methane emissions in 2012—second only to the agricultural sector, which accounts for 36 percent of emissions.

According to the report, “[t]here are cost-effective technologies and best management practices to capture methane from venting and leaks across the entire oil and natural gas value chain.” With such a conclusion, federal regulations mandating methane controls for the oil and natural gas industry seem almost inevitable. The only question remaining is this: how pervasively will the United States Environmental Protection Agency (“EPA”) regulate methane emissions from the oil and natural gas sector? The report indicates within this industry sector, 31 percent of the methane emitted comes from production sources, 15 percent from processing, 34 percent from transmission and storage, and 20 percent from distribution.

On April 15, 2014, to assist the Administration in its evaluation of potential sources of methane within the industry, the EPA released five “white papers” relating to emissions of methane and volatile organic compounds (“VOC”) from the oil and natural gas sector. Each paper examines a potential source of emissions: compressors, completions and production of hydraulically fractured oil wells, leaks upstream of distribution, liquids unloading, and pneumatic devices.

The white papers are technical in nature and will serve as the basis for future policy decisions regarding how and where to regulate methane from the oil and natural gas industry. Each paper consists of four basic sections:

a review and discussion of the amount of emissions from each potential source

a discussion of the available technologies to control those emissions

the cost of those controls (to the extent such data exists)

a set of “charge questions” from the EPA to a panel of three to five “independent experts”

The charge questions are specific to each potential source of emissions, but there is some overlap (e.g., “Did this paper appropriately characterize the different studies and data sources that quantify VOC and methane emissions from leaks in the oil and natural gas sector?”).

While the independent expert panels are reviewing the white papers and responding to the charge questions, the general public is invited to provide “technical comments” and “any additional information or data” regarding emissions, controls or costs to EPA by June 16, 2014.

Although this is not a formal notice and comment process and there is no mention of whether EPA will respond to comments from the public, the industry is strongly encouraged to review the white papers and file comments. EPA has indicated it intends to make the independent expert comments available this summer.

Based on the white papers, independent expert comments and public comments, EPA will “determine what if any regulatory authorities, including setting standards under section 111 of the Clean Air Act or issuing Control Techniques Guidelines under section 182 of the Act,” the agency will utilize to reduce emissions from the five aforementioned potential sources of methane emissions. It is anticipated that EPA ultimately will decide to regulate methane emissions directly, and the agency has projected that any such regulatory requirements would be completed by the end of 2016.

Although publicly announced as part of the Administration’s Climate Action Plan, the white papers initially were raised mid-February 2014 in the context of the ongoing litigation over EPA’s New Source Performance Standards for the Oil and Natural Gas Sector (“Subpart OOOO”), which currently is pending before the Court of Appeals for the District of Columbia Circuit. There was no mention of studying methane emissions, as Subpart OOOO focuses solely on emissions of VOC.

In addition to the white paper process for evaluating methane and VOC emissions, EPA also is scheduled to propose a second round of amendments to Subpart OOOO this spring, with the goal of finalizing those changes by the end of 2014. As indicated in the Climate Action Plan, it is not clear whether EPA intends to undertake a third round of rulemaking under Subpart OOOO or whether it will utilize other provisions of the Clean Air Act.

As mentioned, the industry is strongly encouraged to review the white papers and provide technical comments by June 16, 2014, and monitor these ongoing developments related to the evolution of Subpart OOOO.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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